The B Corporation: New Structure Puts Values Before Profits

The B Corporation. The new structure that legally protects a company that wants to put values before profits. In the article New Legal Protection for Social Entrepreneurs, John Tozzi provides an overview of the new structure and interviews some business leaders to find out their views:

Interest in so-called socially responsible businesses by investors and entrepreneurs has grown in recent years. More than $2.7 trillion­—about 11% of all assets under professional management—were in some kind of socially responsible investment in 2007, the latest data from Bloomberg show. More than 30,000 U.S. companies are members of socially responsible or sustainable business organizations, according to B Lab, a Berwyn (Pa.) nonprofit that certifies businesses as socially responsible.

Under the new Maryland law, benefit corporations must spell out their values in their charters, report annually on activities that benefit the public, and submit to third-party auditing of their societal impact. Becoming a benefit corporation, or shedding that status, would require approval of two-thirds of shareholders.

There are websites that provide more details about the B Corporation movement. bcorporation.net is the website for the non-profit group that certifies B corporations. Here is an excerpt from the bcorporation.net website:

“B Corporations address two critical problems which hinder the creation of social and environmental impact through business:

1) the existence of shareholder primacy which makes it difficult for corporations to take employee, community, and environmental interests into consideration when making decisions; and

2) the absence of transparent standards which makes it difficult for all of us to tell the difference between a “good company” and just good marketing.”

“Why BCorps Matter,” bcorporation.net

There is growing buzz in the news about Benefit Corporations. Maryland is the first state to legally recognize the B Corp and hopes to attract responsible businesses:

“Unlike traditional corporations, Benefit Corporations must by law create a material positive impact on society; consider how decisions affect employees, community and the environment; and publicly report their social and environmental performance using established third-party standards.”

At the core B Corps are significantly different from the business structure of for-profits and nonprofits. A Benefit Corporation is essentially a hybrid of both: a company with the intention (and now, in Maryland) the legal right to do good. Announced last week, Maryland is the first state in the Union to pass legislation recognizing Benefit Corporations.

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About Linda Fisher ThorntonLinda Fisher Thornton is Founder and CEO of Leading in Context, and author of the award-winning book 7 Lenses. She teaches as Adjunct Assoc. Prof. for University of Richmond SPCS. She is leading a movement to help leaders and organizations Unleash the Positive Power of Ethical Leadership.